In the next few days thousands of people in New South Wales will receive a letter from Share Buying Group Pty. Ltd. offering to buy their shares in Insurance Australia Group ( IAG ).
The offer will amount to $ 2.55 a share, but the seller will not have to pay brokerage or other costs. The only problem is that the offer represents about half what IAG shares would bring if sold through regular channels.
This is perfectly legal. Share Buying Group has every right to access the records of IAG and make an offer to buy to shareholders. It is the responsibility of the shareholder to be prudent and weight the offer against the listed price of the shares - and make a rational decision.
Some would consider making an offer of half of what shares are valued at as being predatory. Others would consider it a normal business ploy. Nobody is forced to sell - and some might welcome ridding themselves of shares in favour of some cash money.
Many people found themselves owning shares for the first time in their lives when the N.R.M.A demutualised. These shares pay regular - and handsome - dividends and these payments are franked, hence shareholders get an added benefit at tax time.
Average shareholdings mean that the offer from Share Buying Group represents cash money of about $ 1,600 per share allocation - and that could be very attractive to those with little knowledge of the stock market or the value of shares. There would be a temptation to take the money - and go buy a LCD or Plasma high definition TV set !
The best advice to those receiving such an offer would be to think long and hard before accepting and signing on the dotted line. Check the current price of IAG shares in the daily newspaper - and have a chat with a financial adviser or a stock broker !
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